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description

IMAX was involved in several aspects of the large-format film business: production, distribution, theatre operations, system development and leasing. The case illustrates IMAX's use of its unique capabilities to pursue a focused differentiation strategy. IMAX was initially focused on large format films that were educational yet entertaining, and the theatres were located in institutions such as museums, aquariums and national parks. However, IMAX found that its growth and profitability were constrained by its niche strategy. In response, IMAX sought to grow by expanding into multiplexes. Additionally, IMAX expanded its film portfolio by converting Hollywood movies, such as Harry Potter and Superman, into the large film format. This shift in strategy was supported by the development of two technological capabilities - DMR for conversion of standard 35 mm film into large format, and DMX to convert standard multiplexes to IMAX systems. The shift in strategy was partially successful, but carried the risk of IMAX losing its unique reputation.

learning objective:

This case was developed for undergraduate/graduate students in strategy courses. It may be used after discussion on Environment Analysis, Resources and Capabilities and Business and Corporate Strategies. Students may use the frameworks from these areas to analyze the information in the case. The learning objectives are: To learn how to analyze business situations using frameworks learnt in class; To appreciate the challenges of industry definition and identifying a firm's industry boundaries; To identify the linkage between firm capabilities and strategies; in this case, how capabilities supported IMAX's focused differentiation strategy; To understand the risks of a focused differentiation; To understand how successful changes in strategies require the development of new capabilities; To evaluate the dilemma facing managers within IMAX - to change or not to change? While change may be essential to survival, it is also risky because it destroys the firm's source of differentiation.